The decision came after both the Nigerian government and the World Bank agreed to stop financing parts of the Power Sector Recovery Programme because several reform targets were not achieved and conditions in the sector had changed.
Documents from the World Bank show that the move terminated the remaining balance of the $1.52 billion electricity recovery programme.
The cancelled amount covers all the money that had not yet been released under the project.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7m equivalent, and no further disbursements will be made under the Program following approval of this restructuring,” the bank stated.
The Power Sector Recovery Programme was created to improve the financial health of Nigeria’s electricity sector and reduce the pressure it places on government finances.
The plan aimed to cut tariff deficits, improve the operations of power agencies, and strengthen regulation and accountability in the sector.
The first phase of the loan, worth about $752.5 million, was approved in June 2020 to help improve electricity supply, boost the sector’s financial stability, and increase accountability across the power value chain.
After some progress was recorded, the World Bank approved an extra $763.5 million in June 2023 to continue the reforms and build on earlier achievements.
The new funding became active in June 2024, with the programme expected to run until June 2027.
Combined, both facilities were worth around $1.52 billion.
While the original programme achieved many of its goals and used most of its funds, the additional financing package struggled because key reform conditions were not met. This eventually led to the cancellation of the remaining balance.
The World Bank said Nigeria’s electricity sector still faces serious structural problems despite years of reforms and financial support.
According to the report, distribution companies continue to record high technical and commercial losses, while revenue generated in the sector remains far below operating costs.
The bank also pointed to poor electricity distribution, weak transmission infrastructure, underused generation capacity, and ongoing financial challenges across the industry.
It explained that these problems have created repeated funding gaps, especially through tariff shortfalls, which continue to weaken the operations and finances of power sector institutions.
Despite these setbacks, the World Bank noted that the original programme delivered some positive results.
Tariff shortfalls reportedly dropped by 71 per cent between 2019 and 2022, falling from N581 billion to N166 billion.
During the same period, cost recovery improved from 56 per cent to 94 per cent, while electricity supplied to the national distribution grid increased by 13 per cent between 2018 and 2021.
The bank said all major targets linked to the original programme were achieved successfully.
Encouraged by those gains, the World Bank approved the additional financing to tackle deeper structural issues and push further reforms in the sector.
The extra funding was expected to support a sustainable financing system, improve operational performance, and strengthen governance within power institutions, especially the Transmission Company of Nigeria.
However, many of the expected reforms did not happen as planned. The World Bank blamed this largely on economic changes that affected the sector.
According to the report, the floating of the naira in June 2023 caused the local currency to weaken sharply against the dollar. Since over 70 per cent of Nigeria’s electricity is generated using natural gas priced in dollars, generation costs rose significantly.
At the same time, electricity tariffs for most consumers were not increased to match rising production costs. The report noted that tariffs remained mostly unchanged since early 2023, except for Band A customers whose rates were adjusted in April 2024.
As a result, the gap between electricity production costs and revenue collected from consumers widened sharply. Tariff shortfalls reportedly rose from N140 billion in 2022 to about N1.9 trillion in both 2024 and 2025.
The World Bank said this put heavy pressure on government finances and made it difficult for Nigeria to meet the conditions attached to the additional financing package.
The bank explained that authorities failed to create a reliable financing plan capable of reducing the growing tariff deficits, making it impossible to achieve key programme targets.
It also cited delays involving performance improvement plans and verification processes, especially those linked to the Transmission Company of Nigeria, as factors slowing implementation.
Because of these problems, disbursement under the additional financing remained very low. Out of the $449 million approved under one component of the facility, only $41.24 million was released, leaving more than $407 million untouched.
The report also showed that while about 95 per cent of the original programme funds were disbursed successfully, only around nine per cent of the additional financing package was released.
The World Bank concluded that the programme no longer matched the realities in Nigeria’s power sector and that its goals could not be achieved within the expected timeframe.
The bank also announced that the programme’s closing date had been moved from June 30, 2027, to May 31, 2026, ending the project earlier than planned.
The development came shortly after the Accountant-General of the Federation, Dr Shamseldeen Ogunjimi, warned that Nigeria could reject future World Bank loans if approval and disbursement delays continue.
Speaking during a meeting with a World Bank delegation in Abuja, Ogunjimi said Nigeria expects faster processing of loan requests because the country is expected to repay the funds.
He stressed that delays in approvals could disrupt project implementation and fiscal planning.
“If approvals take more than six months, the Nigerian Government may no longer honour such arrangements,” highlighting concerns over bureaucratic delays in accessing development financing.
He urged the World Bank to speed up approval and disbursement processes to support Nigeria’s development goals.
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